Japan to consult with U.S. on euro bond buying

By IBT Staff Reporter On 10/11/11 AT 4:40 AM

Japan will consult with the United States before it considers buying more euro zone bonds, raising the stakes for European policymakers under pressure from world leaders to resolve the debt crisis quickly.

Finance Minister Jun Azumi urged Europe to restore market confidence in the run-up to a Group of 20 finance leaders' meeting in Paris this week.

He repeated that Japan stood ready to buy more euro zone bonds so long as Europe comes up with a solid scheme to solve a crisis that has resulted in financial rescues for Greece, Ireland and Portugal.

But on Tuesday Azumi added that Japan would consult with the United States first, which a senior finance ministry official said was to underline the international concern over the crisis.

The Europeans must first discuss a scheme among themselves. Only then will Japan and the United States consider what proposals can be made. We'd like to discuss (how to support Europe) closely with the United States, Azumi told a news conference after a cabinet meeting.

Stabilizing Europe's debt situation would help to halt the yen's rise and lead to stable growth in Japan's economy.

The crisis has prompted heavy safe-haven investment in the yen, which rose to a record high against the dollar in August, causing concern in Tokyo that exports will suffer and so struggle to support the economy in its recovery from the March earthquake and tsunami.

Azumi said Japan wanted the G20 financial leaders to discuss the yen at its meeting on Friday and Saturday.

Japan holds about 2.7 billion euros, or 20 percent, of the total bonds issued by the European Financial Stability Facility (EFSF) after it purchased them in January and June.

Foreign leaders have looked with alarm at the inability of euro zone leaders to forge a common approach to tackle the crisis.

Bank of Japan Governor Masaaki Shirakawa called on Europe on Tuesday to deal decisively with the crisis, saying it was the biggest problem confronting the world economy.

President Barack Obama urged Europe to act fast in comments on Thursday and British Prime Minister David Cameron called on euro zone leaders for a big bazooka approach in an interview with the Financial Times.

All 17 euro zone national parliaments but Slovakia have endorsed a new role for the EFSF, including intervention in bond markets, recapitalizing banks and lending protectively to struggling euro zone member states.

Slovakia is due to vote on Tuesday on changes that are seen as vital to EU efforts to contain the crisis.

Asian shares rose on Tuesday on hopes that European leaders are finally taking action. But markets have remained on edge with investors buying the yen, mostly against the euro and emerging currencies, as a safe haven from risk.

Europe's banks expect to be told to raise more capital under a Franco-German effort to solve the crisis after the rescue of Franco-Belgian lender Dexia SA .

German Chancellor Angela Merkel and French President Nicolas Sarkozy said on Sunday they would tackle Greece's woes and agree how to recapitalize the regions' banks by the end of the month, but they declined to reveal details of their plan.